Banking & Finance

Give them credit

Why Ping An, Tencent and Alibaba could be unlikely allies in banking

^

Galloping ahead: Ping An’s Ma

According to the Chinese zodiac, 2014 was the Year of the Horse. And it turned out to be very successful for two internet tycoons surnamed Ma – which means “horse” in Chinese. Tencent’s shares hit an all-time high in March, hoisting its founder Pony Ma to the top of the rich lists. But the mantle then changed hands with Alibaba’s New York listing in September, and grabbing the top spot. Its boss Jack Ma even ended up as runner-up for TIME magazine’s Person of the Year.

For much of 2014 Tencent and Alibaba raced to make rival acquisitions that left onlookers in awe (see WiC230). But it might not be just a two-horse contest, after all. Another Ma – in this case Ping An’s chairman and CEO Peter Ma – might have an important say, especially in how the fast-growing internet finance sector takes shape.

In Hong Kong’s biggest standalone equity fundraising of 2014, Ping An pulled in $4.7 billion last month in a private placement of new shares that involved up to 10 major investors. Both Pony Ma and Jack Ma made personal investments, according to the China Securities Journal. This is actually the third time that the three Mas have teamed up. In late 2013, Ping An launched an insurance joint venture with Alibaba and Tencent to explore opportunities in ecommerce and mobile payments. In November, the trio also co-invested in movie producer Huayi Brothers.

“With both Jack Ma and Pony Ma investing in Ping An, closer cooperation between the ‘three horses’ is expected,” CBN suggests. Ping An is a market leader in consumer finance, it notes, and there are “abundant synergies” for the three to collaborate.

One of the immediate openings could be amassing the profiles of individuals lacking a credit history with the central bank. According to Shanghai Securities News, the People’s Bank of China has credit data for about 320 million people or roughly a quarter of the population. That compares with about 85% coverage in the United States.

“The credit information system established by the central bank does not cover all the daily behaviour that could reflect personal credit,” Yang Tao, a researcher at the Institute of Finance and Banking at the Chinese Academy of Social Sciences, told the China Daily. “Today, an increasing number of transactions and payments are done through e-commerce platforms and various terminals of third-party payment companies. They all leave traces of information to support credit evaluation by commercial banks.”

As a result, the PBoC said this week that it had instructed eight companies to start preparations to provide “credit reporting services for individuals and enterprises”. The business could generate up to Rmb100 billion ($16.5 billion) in annual revenues, according to Shanghai Securities News. Users of such a service could range from China’s up-and-coming peer-to-peer lending services to mainstream banks wondering whether to grant an applicant a credit card.

Ping An, Alibaba and Tencent are on the shortlist and the preparatory period will cover six months.

“This is the first time the central bank has announced the names of candidates that are likely to be the first to run commercial operations based on the gathering and analysis of individual and business credit data,” claimed Century Weekly, noting that firms like Tencent and Alibaba could use data from their online payment systems and social networking platforms for insights on whether borrowers are likely to default on loans.

For instance, the credit reporting unit at Alibaba has access to information on more than 300 million individuals and 37 million enterprises. Tencent has 800 million active users on its different social media platforms. The two giants may now want to consolidate their databases with Ping An, an insurer which operates banking and financial units, Beijing News suggested.


© ChinTell Ltd. All rights reserved.

Exclusively sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.